Economist disagrees with gloomy forecast

ONE of the top economists in the country says pessimism about our economic future "is overdone".

Even if the economy fell below the 5% trend growth forecast last year it was not a disaster given the extreme circumstances.

And chief economist at NCB Stockbrokers, Dermot O'Brien rejects allegations that his continuing optimism is over-done.

Commenting in the wake of the recent NCB Purchasing Managers Services Index, showing lower growth for the fourth month in a row, Mr O'Brien said the overall readout from the Index remains "very positive".

In his view other economists "continue to underestimate" the importance of the services side of the economy.

"It is too old-fashioned to suggest that if the bulk of the economy is not making widgets and other products then it is not generating wealth.

"That is clearly not the case", he said.

While there was grounds for concern after the stock market collapse and the 9/11 disaster in the US, Mr O'Brien said the fallout in an Irish context has not been as "dramatic" as headlines over the past 12 months suggested. Jobs were lost but not as many have gone as the gloomier take on the economy suggested.

Much of what has passed for analysis in the past 18 months on the Irish economy has been nothing more than "opinion and comment", he said. People like bad news, But the reality is the Irish economy continues to outperform, despite the sceptics.

US growth this year will be 2.8%. In Japan the figure will be 0.5% while Germany will be under 1%. Set against that global background the Irish economy looks set to have a very good year by comparison.

"That does not take from the fact that growth has slowed dramatically," he said.

He still believes growth of 5% in GDP terms, in line with the trend growth forecast some time back by NCB, will still be met.

"Even if 2002 finally works out at 1% below trend the ESRI is forecasting 4.3% it can hardly be seen to have been a disaster, some are suggesting.

"This is especially true given the enormous impact the Twin Towers attack had across the globe," he said.

Sticking to his growth rate of 5% for the coming year Mr O'Brien said anecdotal evidence still supports his view that the Irish economy has not gone into disaster mode.

That view is shared by the Central Bank, the ESRI and other analysts; Davy Stockbrokers is the exception. Robbie Kelleher fears the worst is yet to come.

He says GDP last year was less than 4% and it will be just a meagre 2.6% this year, half the NCB forecast. But Mr O'Brien says the evidence on the ground is of a vibrant economy with the overall jobs loss figure still leaving unemployment at close to 5%.